There's seemingly no more difficult area to be operating these days than in advertising. It's still lucrative if you get it right, with 69% of revenues of the US media coming from advertising. If you are running an ad agency, you have a lot of seemingly unbeatable challenges to overcome. 2016 is a year where the difficulties of operating in this industry are set to continue.
So why has it never been harder to operate as an ad agency?
Advertising is Changing
Advertising used to be simple from an agency point of view. Companies bought media and you carried out their wishes. The challenge was in actually doing this. But the issue of making things happen has been combined with the trouble of operating in an increasingly diverse industry.
The old methods of advertising are steadily becoming less effective. For example, Google AdWords is now nowhere near as effective as social media, and consumers are starting to realize this.
The New Generation is Resistant to Advertising
Even in previous years, this was a problem, but now millennials are making up most of the workforce. It's a challenge that has become increasingly urgent. The concept of ad blindness is where users have advertisements on page, but they no longer create a natural focal point.
Their eyes are actively skimming over ads, so it's like they never saw them in the first place. Ad agencies are discovering that the tactics that worked for them before are no longer having an effect on what they are doing. It's a scary prospect, and one that agencies are confused about how to overcome.
Ad Blocking Technologies
Ad blockers have always been a nuisance for ad agencies. Today, they are more sophisticated than ever before. Short of actually forcing users away from sites when they are using ad blockers, there's nothing ad agencies can actually do about them.
It has led to a new world of ad blocking where ad agencies have to actively encourage users to view ads to overcome the blockers. They have to focus less on getting media out into the open and more on researching their target audiences and giving them what they want.
Study after study has demonstrated that users aren't resistant to ads as a concept. They are resistant to irrelevant and annoying ads. The numbers of people who are opposed to any advertising whatsoever is extremely small, and almost unimportant.
Ad agencies that are having success have concentrated less on the quantity of ads and more on the quality of ads.
Failing to Adapt to New Business Models
The big shift from one business model to another is paying for media to paying for performance. This is one of the big changes that have forced many ad agencies out of the industry. Unless you are actually following through on your promises, you are not going to get paid.
Companies are increasingly expecting to pay based on what they are getting back. Previously, you paid regardless of the results and ad agencies weren't responsible for anything that went wrong. Now this has changed and ad agencies are struggling to cover the salaries of their creative department.
It shows that more than ever before results are what will make you a success. Unless you can give people the best, you are not going to survive in this competitive field.
The Issue of Branding
2016 represents a time where branding is a major issue. Today, the power is truly in the hands of users. The rise of social media networks like Facebook has enabled people to conduct their own advertising campaigns, while getting results.
For ad agencies, their main platform in the first place was they can do what ordinary people can't because they have the expertise that others don't. The question is whether the ad industry needs rebranding to accommodate this changing landscape.
And the answer is yes. Ad agencies aren't adapting and so what they are offering isn't unique on any platform. When ordinary people can get great results through hard work, ad agencies are more and more becoming something that only larger and more established companies are using.
There have also been questions over whether ad agencies are still providing value for money.
Ad agencies are in a tougher world than ever before. The world is changing and a lot of organizations are being left behind. Unless you are willing and able to adapt to this evolving industry, you don't stand a chance of succeeding.
What do you think is the biggest challenge faced by ad agencies today?